TrustMor Mortgage Blog

Last Week; Good for mortgage rates, mostly driven by the FOMC policy statement after the meeting on Wednesday, and large declines in May home sales. New home sales dropped 32% and existing sales expected to be up 6.0% were down 2.2%; furthermore, March and April new home sales were revised lower. The housing sector remains in recession. Now with the tax credit expired, the outlook looks weak. Treasury sold $108B of notes last week; the 2 yr auction was strong, the 5 yr had weak demand and the 7 yr was only moderately bid. The technical view of the bond market remains bullish with economic weakness but to set up another run lower in rates the bellwether 10 yr note rate has to close below 3.09% then successfully work through 3.00%----a tall order.

This Week: June employment data to be released on Friday, early estimates are for non-farm jobs to decline and the rate of unemployment is expected to be 9.7%. In May job growth increased 431K but almost all were census workers. Equity markets want to move higher but the headwinds are way too strong as the economic outlook is being revised lower; nevertheless so far there has been non mass exodus. Over last weekend the G-20 meeting in Toronto didn't produce anything more than the usual; pledges to work to make things better. The majority of the Gs want to make deficit cuts a priority while the US wants to continue to spend on stimulus, concerned that ending stimulus will send us to a double dip recession. The week will be choppy; very low interest rates and a vulnerable equity markets, rate markets will continue to be tethered to equities.